Technology, Trade and Economic Performance in the Food Industries: The case of U.S. and Australian Meat Processing

The food processing industries have recently experienced significant structural and economic performance changes, which have in turn had important impacts on the food system overall. In this paper I examine the cost structure of the 3- and 4-digit SIC level meat product industries in the U.S. and Australia from 1970-91. Further, I incorporate a demand structure to allow for trade and technological impacts on output demand and pricing. I evaluate scale, technological, trade, capital adjustment and markup effects using short and long run input cost and input and output demand elasticities. I find that input cost and composition patterns in the meat product industries indicate surprisingly consistent cost and demand structures across the industries and countries. 1he most important technological impacts seem to stem from significant scale economies, which involve capital investment and materials saving in the long run. Import competition appears further to motivate capital expansion. Although the tendency over time independently of these tech/ trade factors is to increase materials use, on balance these factors motivate capital deepening and materials and labor saving. Finally, although large markups of price over marginal cost are found, they are consistent with small markups over average costs (and thus profitability) due to the substantial underlying scale economies.